This paper analyzes, in a setup where only the control over actions is contractible, the rationale for delegation. An organization must take two decisions. The payoffs are affected by a random parameter, and only the agent knows its realization. If the principal delegates the control over the...

It has been shown by Sah and Stiglitz [1986, 1988] that organizational form crucially affects societal information aggregation. This paper demonstrates that organizational form also crucially affects the incentives to acquire information. It is shown that relative allocative properties of...

This paper compares benefits and costs related to hierarchical and decentralized organizations in an agency framework. We show that the relative efficiency of hierarchy diminishes in contexts with asymmetric information. When effort is not observable, performance-related pay is required in order...

This paper considers the role of opportunism in three contractual theories of the firm: rent-seeking theory, property rights theory, and agency theory. In each case I examine whether it is possible to have a functioning contractual theory of the firm without recourse to opportunism. Without...

According to Becker´s human-capital theory, employers tend to underinvest in general training relative to specific training because it increases their existing employees´ outside opportunities. We show that this is not necessarily true if training has an information-gathering function that...

We examine the effect of uncertainty on horizontal mergers, considering that firms must decide whether to merge before observing the realized cost of the merged firm. The existing literature clarifies that merging firms facing cost uncertainty decide to merge if expected efficiency gains or...

We demonstrate that a multi-period model, and the valuations it implies, is essential for understanding inefficiency in cooperative organizational forms. Investment is efficient given the supply of input, but economic inefficiency arises because of over-supply of input induced by suppliers...

We consider the effect of the regulation of telephony on Haan's [2001] analysis of the economics of free Internet access. Haan considers an unregulated market, and finds that free Internet access is compatible with an efficient outcome and avoids the double marginalization problem. We find that...

Authority is modeled as the right to undertake a noncontractible decision in a joint project. The decision-maker is assumed to exert an externality on the other parties; overall surplus is shared according to generalized Nash bargaining. Under limited liability, the agent whose marginal costs...

In the period from the 9th to the 12th century, Germany witnessed essential steps from a backward agrarian society towards a considerable degree of specialization and trade. The two main institutional innovations of this development were the rise of market places (until the 11th century) and...